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Understanding FinCEN’s Beneficial Ownership Information (BOI) reporting requirements

On Behalf of | Jun 28, 2024 | Business Law

The Financial Crimes Enforcement Network (FinCEN) introduced a new reporting requirement known as Beneficial Ownership Information (BOI) Reporting Rule in 2024. BOI reports will list the individuals who own or control a business, including their identifying details like names, birthdates, current addresses and identification numbers with the issuing jurisdiction.

Why applicable entities and people need to comply?

Compliance with these new federal reporting requirements is vital for your business’s financial integrity and the security of the nation. By collecting beneficial ownership information and sharing it with law enforcement, financial institutions, and other authorized users, FinCEN makes it harder for bad actors to hide or benefit from their ill-gotten gains.

Who needs to report Beneficial Ownership Information to FinCEN?

The BOI applies to all reporting companies. A reporting company refers to any domestic or foreign corporation, limited liability company, or similar entity formed in a state by filing with a secretary of state or similar office. It includes many business types, such as C corporations, S corporations, partnerships, and LLCs, including single-member LLCs.

Who doesn’t need to report BOI?

The reporting requirements are far-reaching, but there are some exemptions5. Most exemptions apply to entities already operating under heavy federal reporting requirements. These include public companies, banks and other financial institutions, securities brokers and dealers, insurance companies, registered investment companies and advisors, pooled investment companies and more.

The exemption for a “large operating company” is available to any entity that:

  1. Employs more than 20 full-time employees in the United States
  2. Has an operating presence at a physical office within the United States
  3. Has filed a federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales on the entity’s IRS Form 1120 or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles3.

Penalties for non-compliance with FinCen

The penalties for non-reporting or providing false information can be substantial. Businesses that fail to report their beneficial ownership information may face civil penalties of up to $500 per day for each day the violation continues, with a maximum of $10,000 and/or up to two years of imprisonment8.

The stakes are high when it comes to your company’s compliance

Understanding and complying with FinCEN’s BOI reporting requirements is crucial for businesses. It’s important to note that these rules and exemptions are subject to change, and it’s always a good idea to consult with a legal or financial advisor to ensure your business is compliant. If you need clarification on whether your business needs to comply with these reporting requirements, consider contacting a business law attorney here in New York City who understands federal business regulations. They can provide valuable guidance and ensure your business stays on the right side of the law.